SAHL, also announced the launch of a new type of home loan whereby clients only have to pay the interest on the outstanding balance.
According to Penwarden, the new product allows for huge flexibility as clients can choose to pay either, only the interest, the full monthly instalment or any amount over and above that.
Penwarden believes that this product caters to the needs of modern consumers who no longer pay off a house over the full term of the bond.
This is the very type of mortage that sparked off the bubble in the US and is now responsible for the bubble implosion there, with flippers starting to panic as their IO periods reset and they have to start paying off the principle on mortages they can now not afford.
In real terms this is not even a mortage. You're basically renting from the bank during the IO period and when the reset period kicks in and you have to start paying off the principle of the mortage your monthly payments can increase dramatically.
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